It seems that each time a new corporate crisis occurs or a rogue is exposed, governments and regulators find flaws in their existing systems and decide to redefine the notion of “responsibility”.
There are long-standing laws which state the duties of company directors and officers to their company, shareholders and creditors. The courts fine-tune these laws from time to time to deal with particular facts, for example insolvent companies or the role of a chairman, but generally people understand these laws.
Recently the terms “responsible officers” and “responsible persons” have been added to the list of who is responsible for companies.
Under FSR, ASIC’s AFS licence names the responsible officers: a responsible officer is the person who is responsible for making decisions about a product or service whether or not that person is the CEO . APRA has now introduced the concept of “responsible person” which extends responsibility from directors and senior managers to auditors and consultants. In each case the responsible person (or officer) must have particular competencies, skills or experience and be adequately trained to satisfy the regulator that the person is capable of carrying out their duties. Both ASIC and APRA have the power to disqualify persons who are not “fit and proper”.
There is no guarantee that satisfying these new rules will make the business perform better or avoid future corporate failures but the message is clear: if you are responsible for a company, you will be held to account if you do not exercise the necessary skills.
Related article: Corporate governance update